Zarrella not a car guy

Ron Zarrella tried to slap his brand on General Motors Corp. In the end, product won.

One of the most controversial execs in the auto industry, Mr. Zarrella last week exited as president of GM's North American operations seven years after he came aboard as brand czar. Never before has an auto industry outsider risen so far, so fast.

In a phone conference with reporters, Mr. Zarrella said he wanted to be remembered for installing "a fundamental understanding of brand positioning," improving quality, retaking truck leadership, getting the first market-share rise in 30 years, eliminating model overlaps and setting Cadillac's future path. Mr. Zarrella, 52, is returning to Bausch & Lomb as chairman-CEO.

Auto experts agree GM's quality and trucks are better, but the market-share rise was due to post-Sept. 11 0% interest financing. They said GM still has too many overlapping models and while Cadillac has a slew of new models coming, success isn't assured. Long-term prospects for Buick are uncertain, they added, and Saturn was "neutered" last year when GM brought it into its consolidated marketing operations (see related story, P. 1).

Three of the four experts contacted for this story expressed hope that successor Bob Lutz, the industry veteran hired in September, will bring needed changes to GM. Mr. Lutz, 69, who remains vice chairman of the company and becomes chairman of North America, is seen as a product champion who intuitively knows good car design.

George Peterson, president of consultancy AutoPacific, said Mr. Lutz's charismatic management style represents a sharp break from "the faceless bureaucratic committee style that has been there for the last 30 years." But Mr. Peterson said Mr. Lutz can't underestimate the staying power of GM's traditional culture. "I'm not sure everyone at GM is just saluting and marching in lockstep with what Lutz wants," he said.

GM unseated Procter & Gamble Co. in 1997 as the nation's largest advertiser, the first time since 1962 that GM outspent P&G, according to Advertising Age. GM kept that top slot every year through 2000, when it spent $2.9 billion in measured media.

Ad agencies welcomed Mr. Zarrella's expanded budgets and the challenge to give each car a personality. At the same time, agency executives privately voiced frustration at the naivete of some auto outsiders Mr. Zarrella brought in as brand managers. Agencies' and brand managers' charge likely will change under Mr. Lutz, who during his days at Chrysler Corp. stated the brands are the car divisions and that model ads must reflect a division's core values.

Mr. Zarrella is seen as the father of post-Sept. 11 0% financing, which GM implemented and the industry followed. Until the 0% deals, GM's market share was in a virtual free fall under Mr. Zarrella. GM's U.S. share fell from 32.8% at the end of 1995, after his first full year, to 27.5% in August, according to Ad Age sibling Automotive News. It jumped to 31.9% in October-at the cost, critics say, of borrowing sales from coming months by offering the incentive.

Maryann Keller, an independent consultant, said she believes Mr. Zarrella "destroyed the brands. The advertising has been awful and brand management has been a failure."

Still, AutoPacific's Mr. Peterson said Mr. Zarrella isn't single-handedly responsible for GM's failures in the past seven years. "The thing he couldn't do was turn things around, and that was what he was brought in to do."

Mr. Zarrella was hired in late 1994 at the urging of John Smale, the former chairman of P&G who led a 1992 boardroom revolt at GM. Mr. Smale served as non-executive chairman of GM, with Mr. Zarrella his standard bearer for GM to adopt package goods-style brand management.

But marketing cars isn't the same as selling soap since cars are expensive goods that consumers evaluate in different ways, Ms. Keller said.

Mr. Zarrella insisted several times during the conference call last week that Mr. Lutz' arrival didn't prompt his departure. He said he learned from Mr. Lutz about auto design and auto research. Mr. Zarrella explained Mr. Lutz' view was "you shouldn't look at any [consumer] research until you get the exterior of the car right, and we didn't always do that."

Ms. Keller termed those comments "a startling admission: If he needed to learn, he shouldn't have been in the position he had."

Mr. Zarrella "continually underestimated the complexity and rigor required to stay ahead of the pack in this business," said Mr. Sanfilippo. "I think Mr. Zarrella was a very bright, astute business man, but just not a car business man."